Read the case study Saab Training Systems, and answer the following questions: 

1. Why did the functional structure not suit the company’s strategy? 

2. How did the team-based structure help? 

3. What problems could the team-based approach create?

In the 1990s Saab Training Systems was a high-tech company working in the defence industry. It was a fully owned subsidiary of the Swedish company Saab. In 1997 the company had 260 employees and a turnover of about £52m. It sold computer-aided equipment for military training – for example, laser-based simulators. The market was characterized by long, complicated, politicized negotiations with clients, fierce global competition, and overcapacity as defence budgets reduced as a result of the ‘peace dividend’. This high degree of uncertainty and need for flexibility had forced the company to react. It shunned external alliances, which were common in the industry, and focused on exploiting its core competence in laser-based simulation. But it also needed to drastically speed up throughput times in both development and production to get new product to commercialization faster and then to shorten delivery times. 

The company decided to abandon its traditional functional structure in favour of a more flexible team-based structure and a more business-process-oriented way of doing business. Before these changes the company was organized into functions (production, development, marketing, and purchasing). Each function had its own internal hierarchy. This structure created problems with cross-functional coordination and communication. In the new structure, forty teams were created that reported directly to the senior management team. Team sizes were between six and eight. If they got bigger they were split. The teams were built around the business processes. There were five business teams who negotiated contracts with customers and monitored contracts. Each team was responsible for one or more products and particular geographical markets. When a contract was signed it became a ‘Project’ to which other teams were assigned: a delivery team (who planned production and tested products prior to shipping); a purchasing team (responsible for sourcing materials and components); and an applications team (who adapted the company’s ‘standard’ products to the need of particular customers). Finally, production was assigned to one of fourteen product teams (who were also responsible for product development). In addition to these ‘front-line’ teams there were central functions such as personnel and finance. 

Coordination of the various teams involved in a customer’s order was very important since the particular mix of teams assigned to that order was temporary. It was dissolved as soon as the order was delivered to the customer. Also, product teams were working on more than one project at any time. The responsibility for coordination of any project was shared between the business team (commercial responsibility) and delivery teams (production planning).